French public debt under 3 percent for first time in 10 years

French Finance Minister Bruno Le Maire welcomed the "good news" on Monday and said France has honored its agreements.
Reuters/Charles Platiau

France reported a public deficit of 2.6 percent of gross domestic product (GDP) in 2017, below the EU limit of 3.0 percent for the first time in a decade. The INSEE national statistics agency also reported 2.0 percent growth in 2017, France's highest in six years.

The deficit figure, which beat expectations of 2.9 percent of GDP, is a fresh sign the Eurozone’s second-biggest economy is experiencing a rebound under President Emmanuel Macron. In 2016, the deficit stood at 3.4 percent of GDP.

The decrease is mainly due to a more favorable economic situation, which boosted national and local tax revenues, made it possible to earn additional contributions on wages, and supported GDP growth last year.

The 2017 figure was the first to come below the European limit since 2007 -- the year the global financial crisis erupted. France, long a laggard in Europe, has come under strong pressure to do more to reduce its budget deficit and debt, which are still among the highest in the Eurozone.

French public debt

According to INSEE, the decline in the deficit has not, however, allowed to reduce the public debt, which continues to accumulate, as the government is still borrowing more than it repays. At the end of 2017, public debt stood at 2.2 trillion euros, or 97 percent of GDP, compared to 96.6% at the end of 2016.

"We have honored our engagements," said Finance Minister Bruno Le Maire, as he welcomed the "good news". "It is proof that the strategy laid out by the president of the Republic on reducing public spending, realigning our public accounts and growth is the right one," he said.

Growth picks up

France and Spain are the only Eurozone countries to remain under the EU's "excessive deficit procedure". Brussels, which had already granted France two two-year deadline extensions (2013 and 2015), excluded any new extension. "To be the leader in Europe," France must "lead by example," warned the European Commissioner for Economic Affairs Pierre Moscovici in late January, calling on Paris to continue its efforts.

To be given the all clear, France must register a deficit-to-GDP ratio below 3.0 percent for another year.

Macron's government has forecast a 2.9 percent deficit for 2018, but thanks to the strong growth, that goal may now be revised downwards.

The economy expanded by 2.0 percent in 2017, representing a marked pick-up from 2016, when GDP grew by 1.1 percent. France performed particularly well in the fourth quarter of last year, when GDP expanded by 0.7 percent.

According to INSEE, France achieved accelerated growth thanks to growing investments, even as consumer purchasing power slowed.

Overall, growth was still well below the 2.5 percent rate that the Eurozone reached in 2017, for the first time since the financial crisis implosion.